An Economist Uncovers A New Market Trend: The Rise of the DIY Consumer-Entrepreneur.
[postintro]This article continues the occasional series from Professor Raushan Gross on The Institutions Of Entrepreneurship. Entrepreneurship is a powerful pathway to innovation, growth, prosperity, and a better life for all. Its emergence and thriving are not automatic; it requires enabling institutions. Professor Gross will analyze and explain the institutional supports required for entrepreneurship to play its role in elevating society to the highest levels of achievement.[/postintro]
Marginal and well-meaning small businesses are leaving the marketplace in droves during the COVID economy. Many consumers want to patronize these businesses, but the current economic situation calls for consumers to adjust and make trade-offs in their consumption patterns. The inability of small businesses to offer services and products due to COVID may well lead consumers to take on a new role in the marketplace – as consumer-entrepreneur.
The economic situation poses new realities regarding how the COVID transformation has and will affect consumers’ thinking about service and product acquisitions in the long run. The marketplace may shift as an unintended consequence of consumers’ changed attitudes. Yes, there are digital options, but there is an array of services that are not in a digitized format, especially some service-oriented acquisitions such as hairstyles and cuts, dental work, cosmetics, vehicle maintenance, and the like. The products and or services that consumers have historically received from small businesses in the past will, in many cases, be no longer be available. These market changes must alter consumer actions regarding product and service acquisitions in a far-reaching way that we have yet to see.
The immediate effects of the COVID economy are small business closures and the pivot to online acquisition of economic goods and digital services. However, we often do not consider the long-run effects that are not yet visible based on the change in customers’ behavior as they decide how to adjust to the fact that fewer options are available. To this point, Thomas Sowell once said that people are not blocks of wood, they react to changes in ways never intended.
The DIY entrepreneur-consumer uses their own human capital, skills, resources, and networks through the use of social and digital platforms to bring to market their creations. Simply, the consumer-entrepreneur is an individual who produces the end product or service themselves and sells their products to other consumers in a consumer-to-consumer marketplace. Not that all DIY options are the best or worst, but it is a manifestation given the consumers’ choices under the COVID market phenomena. Simply, people respond to changes in the market.
Many consumers have experienced a market transition in which doing projects themselves – to produce products and services which they would have had to search for and find in the marketplace – has its advantages,. While many small business owners experienced the adverse effects of the COVID economy on the existing marketplace, consumers have found ways of doing things themselves and providing their services to others in an emerging consumer-to-consumer marketplace – C2C. The visible effect of COVID is fewer and fewer small business providers in the marketplace, but the invisible secondary effect is that this dissipation creates a consumer-entrepreneurial culture. Consumer to Consumer (C2C) is a marketplace ecosystem where individual consumers sell to and buy from other consumers.
There is no doubt that the horn of plenty for at-home consumption via digital products and platforms has fulfilled want-satisfaction, but there are some services where consumers must take part in their acquisition. Surely consumers can order most products online and download digital products and some digital services, but what about the services where the acquiring consumer must play an active part in its consumption? People would love to have dental work performed virtually, it would save the pain of a real visit, but this is not a service that one can accomplish (DIY) at home. Another example: I cannot get a hair styled or cut virtually, but I can do it myself in the comfort of my own home. I cannot get my car oil changed if my mechanic closes his doors. I guess I can do it myself.
If we look past the immediate benefits of our digitized consumption and think about the secondary effects of digital consumption, there is a significant additional array of consumers’ choices, particularly their choice to DIY and engage in entrepreneurship. Whether consumer-entrepreneurship is good or not so good, we do not know. Optimistically speaking, individuals who never thought of DIY-ing themselves and becoming a consumer-entrepreneur can now reap the benefits of the digital marketplace.
The simple fact is that if my mechanic closes his shop, I will have to maintain my vehicle myself. If my barber closes his business, I will have to style and cut my hair myself, which will not look the best, but the alternative is untenable. The short-run visible effects are the number of technological platforms that will allow consumers to DIY and e-commerce platforms to engage in consumer-to-consumer exchanges for their want-satisfaction, leading to an increasing number of consumer-entrepreneurs. The long-run effect is that consumers will have a new role in the future market economy which we have not intended – the DIY consumer-entrepreneur.
In the long-run, small businesses decrease their market presence, allowing more consumers to become more productive in satisfying their own wants and those of others, which creates a robust (C2C) marketplace. The immediate effect will be to show that consumers are creative and can be entrepreneurial. In the long-run, will consumers make these timely trade-offs between their leisure and production and overcome the disutility of their labor to DIY their services and produce goods for themselves and others in the (C2C) marketplace? Only time will tell if the COVID economic impact has a lasting effect on consumers’ ability and willingness to increase consumer-entrepreneurship.
Raushan Gross, Ph.D. is Associate Professor of Business Management at Pfeiffer University.